Public Bill Committee

[Katy Clark in the Chair]

Written evidence to be reported to the House

P 02 Consumer Focus

Katy Clark: Before we resume our line-by-line consideration of the Bill, I remind members of the Committee that the deadline for tabling amendments to be considered next Tuesday is the rise of the House today. The deadline for tabling amendments for consideration on Thursday next week is the rise of the House on Monday night. Please bear in mind that the House occasionally rises earlier than expected.

Clause 1  - Equalisation of and increase in pensionable age for men and women

Amendment moved (5 July): 23, in clause 1, page 2, line 19,at end add—
‘(8) The Secretary of State shall review the options for linking pensionable age to the number of years in employment so as to ensure that pensionable age is reached no later than 49 years after entry into employment. The Secretary of State shall report the findings of his review to both Houses of Parliament within six months of the passing of this Act.’.—(Malcolm Wicks.)

Katy Clark: I believe that when Committee adjourned on Thursday, Mr Wicks had finished speaking to the amendment.

Sheila Gilmore: I am glad to have the opportunity to resume our debate under your chairmanship, Miss Clark. The amendment asks us to consider a different way of arriving at an appropriate retirement age. It is aimed not only at women, on whom we spent a good deal of our previous debate, but men. As we know, life expectancy has indeed improved substantially over a number of years, and has even improved quite substantially during the past decade. Between 2003-05 and 2007-09, life expectancy at birth improved from 76.5 years to 77.9 years for men, and from 80.9 years to 82 years for women. However, life expectancy at the age of 65, which is crucial for pension purposes, has also improved and, during that same period, the time that men expect to live after the age of 65 increased from 16.7 years to 17.8 years. For women, it increased from 19.4 years to 20.4 years, so we are seeing considerable changes in the length of time people live.
However, as my right hon. Friend the Member for Croydon North explained on Tuesday, life expectancy varies considerably from one part of the country to another. The lowest life expectancies both at birth and at the age of 65 when such matters were last examined were in Greater Glasgow and Clyde, where I spent considerable time over the past few weeks in Greenock and Inverclyde. Obviously, wonderful views do not necessarily improve health greatly. Perhaps that life expectancy is due to the hills that one has to go up and down, although I suspect that it is due to more basic issues such as income and life chances.
That area is not the only place that shows such a differential. Interestingly, the Western Isles also have a relatively low life expectancy, so even living in an idyllic rural setting is not necessarily the answer. Other places, as we would expect, are often industrial or ex-industrial heartlands such as Liverpool, Hartlepool and Blackburn. It is worrying that the gap between the highest life expectancies and the lowest grew even during the past decade. The advantages that we are seeing of longer life do not seem to be increasing at the same rate. Those who already had greater health and life expectancy have not been galloping ahead, but certainly cantering ahead faster than those in areas and social groups that already had the lower increase.
It is a matter of great concern to the Government, as it was to the previous Government, that numerous reports have shown that the increase in life expectancy is speeding up, although the differential remains and appears to be growing. A figure that is quite striking from the various reports shows that it took 70 years—from 1920 to 1990—for average life expectancy at age 65 in the UK to rise by 5 years, but the next 5-year increase took just 20 years between 1990 and 2010. The class of 2010 are not, as some of us might like to think, those who became MPs in 2010, but the retiring class of 2010 who were born in 1945—sometimes referred to as the cod liver oil and orange juice generation, because as children they benefited from cod liver oil and orange juice.
People who have not have experienced cod liver oil capsules at school do not know what they have missed. I am sure the orange juice had lots of oranges in it, but it had a slightly odd taste that I have never experienced in any commercial brand. However, it does not appear to have done us any great harm. I was not born in 1945, but I remember the cod liver oil and orange juice. The 2010 class were the beneficiaries of child welfare clinics, the new NHS and better housing—markedly so for many families. That is of interest when we consider what is going to happen to longevity later, and indeed how we improve longevity for those who are not quite seeing the benefits. Was it those early experiences that contributed to that longevity? Is this genuinely the product—the final product—of that welfare state generation?
People who reached 65 in 1990—the class born in 1925—were the children of the depression. They had considerably poorer housing and living standards, and there was no NHS. I am not sure whether what we have seen recently is purely a result of the big improvements in the immediate post-war period, or whether something more recent is driving the improvements. To see such big changes within a decade suggests that something quite significant is happening. The Government assume that life expectancy will continue to rise at the same rate, and that assumption has driven a lot of the reforms. If it continues to rise, how are we as a country going to afford the financial obligations? If we cannot afford to meet the financial obligations, we have to start planning now.
We will not know for some considerable time, but I suspect that the rapid increase may not be replicated over the next 20 years. Someone has probably researched this, but I do not see it necessarily replicated in the assumptions in the Government documents that we have been looking at. It might be unwise to assume that it will increase, although we are assuming that. We know that many of us are living longer, but that is not shared equally across the population. The Minister has spoken strongly and passionately about intergenerational fairness, which is important, but one aspect of fairness is horizontal fairness—the fairness within generations.
I have already given examples of the big differences that can arise between one part of the country and another. Many of us will be aware of considerable variations within our own towns and cities. I am aware of variations in Edinburgh in areas that are not a million miles away from each other. Our local newspaper illustrated the problem by showing two areas that were cheek by jowl, so it is not something to do with the climate. The two areas are close to one another, but show considerable variation in both life expectancy and healthy life expectancy.
Some years ago, the introduction of flexible retirement ages was much discussed, although it seems to have disappeared from the horizon in the current debate, with people having provision to retire on a sliding scale between, say, 60 and 70—that was often the suggestion—and to draw state pension, possibly reduced if people had not completed enough years, at a variety of ages. The abolition of the default retirement age, which I welcome, has gone some way to improve flexibility, but the other aspect—people being able to draw a pension at a variety of ages—appears to have disappeared from the debate and been replaced by blanket increases, which do not take into account individual or group circumstances. In those days, I also seem to remember a fairly serious proposition about achieving gender equality in retirement ages: we should reduce the male age slightly and bring them together at 63. That did not happen, but it was an idea.

Malcolm Wicks: My hon. Friend’s train of thought is interesting. When we come to the private and occupational pension sector, most of us are against one set age for retirement—we want flexibility about working and when we can draw that pension. The amendment tries to bring a little more flexibility to the state pension age which, at the moment, the Government still see as a set age, regardless of circumstance or socio-economic background.

Sheila Gilmore: I thank my right hon. Friend for that contribution. We lost an element of the debate when we moved away from that earlier, serious discussion, and how to implement such a proposal, but it did not come about. His amendment is the sort of thinking that could return us to that view.

Lilian Greenwood: I ask my hon. Friend to give way because of the intervention by my right hon. Friend the Member for Croydon North. In occupational pension schemes, when people choose to take their pension before the normal retirement age, it is often actuarially reduced, usually based on the average life expectancy in the scheme. Given people’s different life expectancies, if one could take one’s state pension early, might it be possible to reflect somehow one’s life expectancy, based on contribution history or social class? Might that be a possible way forward or worth looking at?

Sheila Gilmore: Clearly, it is not always possible to look at everyone’s individual circumstances. My right hon. Friend the Member for Croydon North is looking at a proxy for some of those circumstances, rather than having to dig into everyone’s particular health situation. On the general assumption that those who started work earlier and perhaps have been in the kind of work that has had a more deleterious effect on their health and are much more likely to be suffering ill health in late middle age, the proxy of the number of years of contributions takes us some way forwards. Obviously, others who have made that number of contributions might not be in any way affected but, until the number of contribution years was reduced recently, some of us even were finding it difficult to meet the maximum contributions in our working life, because of a relatively late start and perhaps some time taken out of employment.

Malcolm Wicks: I promise not to intervene too much because I will have nothing left to say in my final speech. Does my hon. Friend agree that, as we discussed on Tuesday, the facility to defer one’s pension, which has been around a long time, and the added facility to take that deferment as a cash lump sum, which came in under the Pensions Act 2004, when we were in a slightly different—better—place, bring that flexibility if people want to defer their pension. The amendment would introduce a bit of flexibility earlier on when we start to raise the state pension age.

Sheila Gilmore: It is a useful way of seeing how the sliding scale might work in giving people that degree of choice. There are people who feel, having reached the current state pension age—and potentially, into the future—that they are not ready to leave work, and who have the opportunity to stay in work. With the rules having changed and the default retirement age having been abolished, it will be much easier for people to do that if they are fit and able, and want to. Not everybody does have that opportunity, either because of the type of job they do or the type of employment arrangements that can be made. Some degree of flexibility could allow us to reflect the reality that group and individual experiences are very different. There are substantial numbers of men and women who are economically inactive before state pension age, and this is a group which is perhaps surprisingly larger than we might imagine. Among those, some are people whom we would not see as being in any great need.
There are two groups of people who are economically inactive in those years leading up to state pension age. There are those who have made a positive choice to retire early, possibly because they were in employment with an earlier retirement age—which has been common in certain occupations in the recent past, although this is changing—and who had sufficient occupational pension provision to be able to retire before their state pension came in. If the state pension is a relatively small part of their replacement income in retirement, this is quite a rational and desirable option. For some people who have good occupational cover, the state pension is additional income—to which they have a clear right—but is not something upon which they depend. They can make a choice, to say, “If I retire at 63, and pick my occupational pension up at that age, I don’t get my state pension for two years, but that doesn’t matter because it’s really not that crucial to my income replacement.” Indeed, when the cost of travel to work and other costs associated with employment are factored in, it may well be that people are making an extremely rational choice. That is one group: those who retire early, before state pension age, because they have the financial ability to do so, and want an opportunity to travel, or volunteer. These people are often the backbone of organisations such as citizens advice bureaux, for example. Obviously, this will change slightly as occupational schemes and employers change their rules.
However, the second group who are economically inactive in this period and, perhaps, the people at whom this amendment is directed, are those who are not making a positive choice, but are involuntarily inactive. They may have been made redundant later in life. I think we all know that it is not easy for people who are made redundant in their late 50s or early 60s to find other employment. That has been a reality for a considerable number of years. Although age and experience have a lot to offer employers, in certain types of occupation youth and fitness—and sometimes cheapness—may well be what the employer is looking for. There are also people whose health is, to a degree, compromised. Ill-health often starts to affect people at that particular point; there is a real increase in the number of people who have substantial health problems as they approach retirement. It is not the answer simply to say, “Out-of-work benefits are an adequate substitute for the state pension, so people are provided for. If they cannot work because they have been made redundant and haven’t been able to find another job, or they’ve had an illness from which they are recovering but they are not restored to full fitness, there are other benefits that they can claim.”
All those other benefits, however, are subject to various conditions, some of which are stringent. People must meet many conditions to claim jobseeker’s allowance—they must attend job interviews and show willingness to apply for jobs. Such conditions are extremely important, particularly for younger people who become unemployed, because it is crucial that they be encouraged and assisted to get back into employment. However, the position is onerous for many people. I have spoken to constituents, such as men in their early 60s who have lost their employment. In their view, the conditionality—filling in forms, writing CVs, attending job interviews—is humiliating and is a pointless occupation.
Employment and support allowance, to which people might be entitled if they become ill, has various requirements, too. Unless people are in the support group, they must go through various reassessments, which they find stressful and difficult. Again, there is a significant difference between someone of, say, 62 or 63, who has worked for most of their life until illness has hit them; and someone who has become ill in their 30s, who we all think should not stay on incapacity benefit for ever. The previous Government introduced employment and support allowance to tackle that, but we must look at its edges to see how it might affect some people particularly badly. Crucially, the conditions that apply to other benefits will still apply when universal credit is introduced—universal credit will not alter that situation; it will re-badge it.
Out-of-work benefits are significantly lower than the state pension, which is £30 a week more than jobseeker’s allowance. That is a significant amount of money—it is a 40% increase in the income that someone receives. Perhaps £30 a week does not sound much—some people might say, “I spend £30 on a couple of meals in the week; it is not much money to be without.” However, for people who have left employment without resources, savings, or an occupational pension, £30 is a significant sum of money, and it must be taken into account. Although people will receive means-tested benefits if they are on their own and are unsupported, such benefits will not apply to others, such as those who have a partner in employment—[Interruption.]

Malcolm Wicks: I am following the argument with great care. In the data on economic inactivity rates, to use that quaint term, 39% of men aged 62 are inactive; by age 63 it is 46%; and by 64, the year before they receive their state pension, it is as much as 52%. Would it help the Committee if the Minister told us how many of those people seeking work in their final years before state pension age are successful in getting jobs? Such data must be available to the Department and would aid the Committee. Those people who are unsuccessful are left in a twilight area, relying on benefits for other purposes as a kind of pre-retirement pension.

Sheila Gilmore: I was quite surprised by the numbers of people—particularly men—in that age group who are economically inactive. As I have said, some such people will be those who have made a positive choice to get work. The figures before us do not break down their ability to do so, and I would be interested to see that. We all know people who have made exactly that choice and feel that it is appropriate for them and gives them the opportunity to do more while they are fit and well. In recent years, particularly in the public sector but in the private sector as well, people have sometimes been given nudges of encouragement to do so.
One Member who spoke on Tuesday gave an example of someone who had taken a package from a local authority that was calculated on the basis of how long it would be until their state pension began and how affordable such a package would be. The Minister said he found it surprising that people should be endorsing choices not to work, but in my experience, many people—certainly those who work in the university sector—are given a lot of nudges of encouragement when budgets are tight. Employers have not been unwelcoming to people who have wanted to accelerate their retirement, because of the cost to the department. The employer calculates the cost, and so does the local authority. The slightly early retirement of certain senior members can help the department’s budget, at which point it can hire a younger person; it is not a redundancy. Calculations must be carried out to show that such a move will not incur greater costs. All such organisations must make those calculations.
In some circumstances, we have almost encouraged people to retire. We know that those people are probably okay, but I am concerned—

Lilian Greenwood: I draw my hon. Friend’s attention to the figures in the equality impact assessment produced by the Department for Work and Pensions. It does not break things down by year as my right hon. Friend the Member for Croydon North just did, but it says that 41.9% of men aged 60 to 64 are inactive, and of those who are inactive in that age group, 38.8% are sick, injured or disabled. A significant number simply are not in a position to seek work actively.

Sheila Gilmore: That is the group that we must be concerned about. There will also be people who might not trigger the criteria for employment and support allowance, given that many are found fit for work. Some might be on ESA, some might be required to claim jobseeker’s allowance and some might not be able to claim anything much, for example if they have a partner who is working. One need not earn a substantial amount to be ineligible.
There are also significant issues about the need to use up savings, although it is true that that stops after people’s savings have decreased to below the threshold. However, the only amount untouched is £6,000. Above that, savings are offset against the benefit to be received. People will dig into their savings during that period if they have any; not all of them do. Given that people have often worked hard to save money and see it as money to enhance their retirement and help them in case they suffer significant health problems or need care, having to use it up is a double aggravation.
Someone who has worked for the substantial number of years that would entitle them to a full pension but who cannot draw it for some external reason—either because of their health or due to a loss of employment—will find it difficult to have to claim the other benefits available. They are not as good as the state pension, which people feel they have earned and have a right to, without being required to attend loads of interviews and prove that they are making lots of job applications and sit through courses that are probably of little relevance. It might be sensible for existing programmes to focus on younger age groups to ensure that they work, and there is a cost to all of that, which is not always factored in.
If it is accepted that there is an issue about people who are not easily able to continue working even up to age 65 now, let alone when the pension age increases, and they have worked continuously and therefore have a good record of contributing to and having earned their pension, the system should allow greater flexibility. It would be the counterpoint of what my right hon. Friend described, in that someone wishing to defer their state pension has an incentive to do so and has the opportunity to take it as a lump sum or to earn a larger pension. For people who desire that, such an opportunity represents an attractive incentive.
Having given the opportunity of an extension to people at the higher end, giving one to those who want to secure their state retirement pension at an earlier age would be equitable and fair, and it would provide fairness across generations and social groups. However much we all hope that such things will change and however much we have an aspiration that differences in health, life expectancy and life chances will be overcome, we know, if we are realistic, that that will not happen terrifically quickly.
If differences are embedded in early life, which can have a significant impact, it will take several years to make an impact. As I have argued, if the welfare state provisions in the immediate post-war period are still flowing through and having an impact, anything done now will not necessarily help this generation of people approaching retirement or, indeed, people in a slightly younger age group. We would all want that to change, but to say that we have an aspiration to remove the differences and that everything will therefore be well is a little unrealistic. Successive Governments have attempted to do that, and one irony is that improvements in health seem to accrue to those who are already healthier and wealthier than others.

Malcolm Wicks: My hon. Friend started with heroic tales of 1945 and all the welfare measures that were put in place. I must check the history book to see what kind of Government were then in power—dodgy-tasting orange juice and all, but it was good for people. Does she agree that, just as the 1945 Government in many respects set the scene for what came decades later—we are still discussing it today—the Government’s ideas on state pension ages will set the scene for much of this century and the discussion about what is fair for manual workers, as opposed to what is fair for professional workers, could therefore have a resonance in 30 or 40 years’ time?

Sheila Gilmore: Indeed it will, because as the Minister has said many times, pensions policy cannot be dealt with over a short period; getting pensions policy right has to be worked at over a long period. It has been the bane of many pensions debates in the political sphere that—not necessarily for short-term advantage—short-term changes are made and plans are interrupted. I know that I am slightly obsessed with this, but I still feel that one of the things that should never have happened and has really damaged the financial prospects of many people at retirement, particularly of my generation, was the abrupt disruption of the state earnings-related pension scheme introduced by Barbara Castle.

Malcolm Wicks: Who disrupted it?

Sheila Gilmore: From a sedentary position my right hon. Friend is asking who disrupted it. In effect, while SERPS was not abolished, people were allowed the freedom to leave it and many did.

Nicholas Boles: We are all enjoying this trip down memory lane to the golden ages of the Attlee Government and Barbara Castle and the other great heroes of socialism in our country, but do the hon. Lady and the right hon. Gentleman intend to press the amendment to a vote?

Sheila Gilmore: Obviously it is my right hon. Friend’s amendment and I will leave him to deal with this in due course when he replies. These things are important because if we do not look seriously at how we deal with people we could find ourselves in a few years’ time realising that we have damaged the later-life chances of some of our population. While I personally can see no particular difficulty in being able to be in employment at 66, 67, 68—and indeed, the electorate willing, who knows how long?—that depends on many circumstances that may not be in my control, not just the electorate but obviously health issues which may come in.
I know from my constituents that very many people are not easily able to continue in employment at that crucial age, into their 60s. Sometimes they want to work but cannot do so because the jobs are not there and they have lost the employment they have had, but very often their health is compromised. It is useful to look at whether there are arrangements that could give us that flexibility. That was under serious discussion some years ago and we have lost something in moving away from that to a blanket increase regardless of people’s circumstances.

Lilian Greenwood: I am pleased to speak in support of the amendment moved by my right hon. Friend the Member for Croydon North because he raises a vital issue, which goes to the heart of the problem of sharing the costs of longevity—how we ensure that those costs are shared fairly. He very generously conceded that he is asking the Pensions Minister to give careful thought to an issue that my right hon. Friend did not find the opportunity to address adequately while serving as Pensions Minister in the Labour Government. But my right hon. Friend should not be too hard on himself because he did, of course, deal with other important areas of policy, including setting up the Pension Protection Fund and possibly—if my memory serves me correctly—initiating discussions about the reform of public sector pensions, which we did only a few years ago. Suffice it to say that my right hon. Friend is very well respected in this field, and as he has spent his time on the Back Benches giving it much thought I am sure that hon. Members, particularly the Pensions Minister, will give serious consideration to his proposal.
My right hon. Friend’s amendment has immediate attractions for several reasons. It struck me very strongly, when reading the letters that I received from women constituents affected by the changes proposed to state pension age, how many of them had been working since leaving school at age 15 or 16. I should like to have looked up the statistic revealing how many of the cohort worst affected by those changes actually did leave school and join the Labour market at such a young age, but I am sure we are all aware that when those women reached age 15 or 16, in the late 1960s, far fewer young people went on to higher education than do today. I also suspect—although I do not know—that at that time the proportion of women going on to higher education may have been substantially lower than that of men of the same age.
Happily, that situation has changed and far more young people are going on to higher education—at least for now. I am not confident about future trends when the education maintenance allowance ceases in a few weeks and tuition fees rise to £9,000 a year. I do not know whether that will still apply, but I am fairly confident that young women as well as young men are taking advantage of the opportunities for further or higher education, perhaps taking gap years and undertaking postgraduate study, with the result that probably a substantial minority of them do not, as my right hon. Friend noted on Tuesday, start paying regular national insurance contributions until they are well into their 20s.
Returning to the point about the women affected by changes to the state pension ages, it struck me that one reason why they felt so aggrieved was that they had been paying into the system for a long time. Some of them, if they work up to their new retirement age of 65 or 66, will have been paying those contributions for 51 years—many more years than I expect to pay my contributions for if I retire in my mid to late 60s.
I acknowledge that one of the difficulties that the Minister would face in dealing with the principle in the amendment and turning it into a practical proposition would be the disjointed character of women’s participation in the labour market. As we know, when a full state pension depends on completing 40 years of national insurance contributions, many women do not qualify because they have substantial gaps in their contribution records, having taken breaks to have children and to care for them when they were young. Increasingly, many women have to care for partners, elderly parents or other relatives. Therefore, as my right hon. Friend suggested on Tuesday, it might be necessary to look at the date of entering the labour market—it would have to be a proper entry rather than the occasional holiday job—rather than at the total number of years of contributions. I acknowledge that that is far from straightforward, but as we have already noted in Committee, many hon. Members place a great deal of faith in the Minister, so I assume that he is capable of meeting such a challenge. I think that many hon. Members will think it is a challenge worth meeting, because it recognises the importance of the contributory principle that underpins our welfare state. People should receive some recognition that they have worked hard, paid in and earned their pension.
Of course, we cannot have a straightforward contributory principle because not only those who have paid should receive a pension. We rightly take account of those who are unable to pay due to caring responsibilities, disability or unemployment. However, that principle has an element of basic fairness, which people wish to see in the system.
The second attraction of the proposal is that it would start to address the inequality in pension received. As both my right hon. Friend and the hon. Member for Arfon noted when speaking to an earlier amendment, there are still substantial differences in life expectancy according to both location and social class. My hon. Friend the Member for Edinburgh East also illustrated that point with reference to her own constituency. Such differences are well known and acknowledged in the Department’s own impact assessment. Figures from the Office for National Statistics show that between 2002 and 2005, life expectancy for men at age 65 varied from 18.3 years for those in social class I to 14.1 years for those in social class V. Among women, the difference is similarly stark. Women professionals who retire at 65 can expect to live 22 years after they retire, compared with 17.7 years for women undertaking routine unskilled work.
Such differences are significant. A man or woman in the highest social class, who perhaps enjoyed many years of education and probably worked in fairly pleasant surroundings, can expect to enjoy more than four and a half years of retirement more than a school friend who started work at 16 and did a physically demanding job, perhaps in less pleasant environments. I am sure that we all remember the women spoken about by many of my hon. Friends, both in Committee and on Second Reading—women who had worked for many years in what can be described only as back-breaking jobs, whether it was at a dry-cleaner’s or a factory, or as a cleaner. I think of some women in my constituency and the jobs that they would have done, leaving school in the 1960s, whether it was in knitting factories, making cigarettes for Player’s or working at the Raleigh factory, which is now the site of the university; that is the irony. They would have done physically demanding work not only in the workplace but also at home, when they did not have the domestic labour-saving devices that most of us enjoy today.
Thinking about Nottingham brings me to the issue of regional variation, which reflects historical employment opportunities in an area. I did not grow up in Nottingham so I am not sure it if is absolutely true, but people tell me that people who worked at the Player’s factory got free cigarettes alongside their weekly pay packet. That sounds plausible and may be one of the reasons why Nottingham has high levels of smoking, chronic pulmonary disease, heart disease and cancer. Certainly, life expectancy in our city, 75.1 years for men and 80.1 years for women, is lower than the east midlands averages of 77.8 and 81.8 respectively, and the national averages for England and Wales of 77.8 and 81.9.
These differences in life expectancy between social classes and regions prompt the question of whether it is fair for those who pay into the system for the longest—having done some of the most physically demanding, monotonous and probably low paid jobs—should retire and receive their state pension at the same time as those who have contributed for fewer years, especially when those same people are likely to enjoy a longer retirement. Not just a longer retirement but, as my hon. Friend mentioned, a healthier retirement, an issue that is perhaps not fully explored in my right hon. Friend’s excellent paper, which I am sure we have all read.
According to the Office for National Statistics general lifestyle survey of 2008, 33% of people aged 65 to 74 have a limiting, long-standing illness. As I noted on Tuesday in response to some of the concerns raised by the hon. Member for Arfon about the Welsh experience, disability-free life expectancy varies enormously by social class and location as well. ONS figures for disability-free life expectancy at age 65 by local authority area in England and Wales—I am not able to comment on the Scottish experience—show that for men this ranges from 10.5 years in Hart, to 4.2 years in Easington, and for women from 11.7 years in Epsom and Ewell to 5.3 years in Merthyr Tydfil.
When Baroness Hollis spoke in the other place on the Bill, she quoted from the Marmot report, “Strategic Review of Health Inequalities in England Post-2010”. It was interesting, and I want to share it with people:
“In England, people living in the poorest neighbourhoods will, on average, die seven years earlier than people living in the richest.”
Even more disturbing,
“the average difference in disability-free life expectancy is 17 years, so people in poorer areas not only die sooner, but spend more of their shorter lives with a disability.”
The report goes on to state that even excluding the top 5% and the bottom 5%, the difference in years of disability-free life expectancy is 13 years, which shows that we do not have to look at the extremes in order to see the size of this difference. While many of those will still live longer in retirement, their ability to enjoy that retirement may be markedly less.
The Bill accelerates the increase in state pension age to 66. The Government’s Green Paper “A state pension for the 21st century”, contemplates going further, either creating a mechanism to link further rises in state pension age to increases in life expectancy, or introducing the idea of regular reviews. Figures produced by Nigel Stanley at the TUC show that if the state pension age went up to 70, professionals in social class I would loose 27% of their current expected retirement, whereas for unskilled workers the loss would be 35%. We need to consider how to mitigate the discriminatory impacts of future state pension age changes if we are to retain fairness in the system. My right hon. Friend’s amendment provides a suggestion for a way to do that, and I hope the Minister will respond positively to the dialogue and discussion it provokes.

Teresa Pearce: I was very interested to hear my hon. Friend for Edinburgh West say that, due to mortality rates and the fact that people from more affluent backgrounds live longer as a rule, they can decide to defer their pensions. That is something my sister has done. She has her own business, she continues to work, and she does not want to retire. She has deferred her pension and is very pleased because, as she explained to me, if she took her pension now and invested it she would get a tiny amount back, but by leaving it in the pot, it increases by a considerable amount. She is in a lucky position where she can make that decision and get a greater amount—probably for the same amount of time—than somebody who took their pension now and did not have the prospective number of years ahead. I have just realised I have outed my sister as a pensioner and she is going to be very cross, so I will move swiftly on.
The association between health and social class has always been there and has always been accepted. I remember when he was the Secretary of State for Health, my right hon. Friend the Member for Holborn and St Pancras (Frank Dobson) said that health was the greatest class issue of all. Someone from the lower classes does not have a long life; they have a more hard-working life. He said that the biggest discrimination between the classes is health, because someone from the lower classes is more likely to die at a younger age. That is true and that is the issue that we are discussing with this amendment.
While there has been a failure to close that social gap—as MPs we all work towards closing it and the people who write to us are often at the sharp end of things—others would claim that as long as those premises are improving at all levels of society and people are living longer, there is no cause for concern. I think that there is, because it depends what is meant by “living”. A person may be alive, but is it a life? My mother began work in a bakery when she was 15. She is still alive and she claims her pension, but she would say that her quality of life is poor, because she was one of those who worked in an unregulated industry and she now has emphysema. Those work-related illnesses tend to affect working class people, rather than those from the middle or upper classes.
Social class is complex. It involves status, wealth, culture, background and employment. The relationship between class and ill health is not simple. There are a number of different influences, some of which include social class, but there are households in the same street that have different life expectancies. Social class is not the only factor, but it is an indicator and the figures show that.

Hywel Williams: I am grateful to the hon. Lady for giving way, and I apologise to you, Miss Clark, for my late arrival.
It is not just individuals who suffer from these effects. There are whole areas of the country—masses of people and whole communities—that are essentially poor and have poorer prospects.

Teresa Pearce: I am sure that the hon. Gentleman will have in his mind the fact that there are many mining villages in Wales where life expectancy is extremely short because of the health hazards of the work, which was done when regulation was poor.
From the research that has been done and the Office for National Statistics figures that came out last month, it is clear that a good job and a good home in a nice district are likely to bring someone an extra 10 years of life. The life expectancy gap between the middle classes in comfortable suburbs and the low paid in the areas that I represent is widening. Boys born in the wealthier part of the country can expect to live 11.3 years longer than those in the least favoured cities in Britain. For girls that gap is 10.1 years. In the districts with the greatest life expectancy, such as wealthy Kensington and Chelsea in London, a newborn girl is likely to live almost 90 years. A century ago, people did not reach anywhere near that. The 1911 census showed that the average woman lived to 54. I am two years beyond that now. Men, on average, lived to 50.
The figures that came out last month showed that boys in this country can, on average, expect to live for 77.9 years and girls for 82 years. In Kensington, however, a newborn boy can hope to reach 84 and a newborn girl can hope to reach 89. In the least healthy areas of Glasgow and Clyde, the ONS figures, based on evidence from 2007 to 2009, said that the expectation was that a boy would live to 73 and girl to 79. That showed that the life expectancy gap between the upper and lower classes has broken the 10-year mark for the first time.
The Office for National Statistics said in its report that the greatest growth in male life expectancy at birth was experienced by those in lower managerial and professional classes. It added that neighbourhood characteristics also have an effect on life expectancy, and that people in rural areas live longer. Michelle Mitchell of Age UK stated:
“As the state pension age rises to 66 by 2020, it is people in poorer areas with lower life expectancies who will see their retirements cut short. The Government should be extremely cautious.”
The variation in life expectancy is recognised in all studies including, in a converse way, by annuity providers. A conventional annuity is the simplest type of pension income plan on the market. A person gives the pension provider a lump sum, and the provider works out how long that person is likely to live based on their health, lifestyle and gender. It then provides an annuity for that number of years. Because of the discrepancy in life expectancy between wealthy and less privileged parts of the UK, an element of risk is factored into those calculations. Advanced IT systems can now make more accurate predictions about how long someone will live using data that goes right down to their local postcode.
Annuity providers would say that an elderly man living in a prestigious part of west London such as Kensington and Chelsea will on average have a much longer life expectancy than a man living in the most deprived part of Glasgow. That gap can be as high as 13 years. According to annuity providers, areas where life expectancy is highest include places such as east Dorset, Wokingham, south Norfolk, the Chilterns, Horsham, Brentwood and—unexpectedly—Crawley.
We are discussing the whole issue of the welfare state. Pensions are a key area of that, and the contributory principle of pensions was referred to earlier. People may live longer, but if that is due to medical advances we need to look at people’s lifestyles. Do they have a healthy life? Will they have an enjoyable retirement? The amendment is important because somebody who pays into their pension for 49 years will contribute for 49 years to the pensions of other generations. That is the principle of the national insurance system: people pay when they do not need support so that support is available when they do need it. The Minister accepts, welcomes and even celebrates that principle; he mentioned it on Tuesday.
One of the Government’s mantras is that of making work pay. I agree: work should pay. If someone has worked for 49 years, they should be sure that they are paying to provide pensions for others, but also that they are contributing towards the pension on which they will need to draw when they stop working. It seems now that those who start work at 16 could work for their whole life but will receive the least when they reach retirement. The Bill seeks to encourage and improve pensions, and make sure that more people have them. Fairness is integral to that. If someone starts working at an early age, works hard and for a long time but is not able to retire for as long as other people and cannot defer their pension and get an increased amount because of their life expectancy, the public will see that that is unfair. I welcome the amendment; it has been interesting to listen to the different aspects of how class affects people’s lives.

Malcolm Wicks: This discussion generally reminds us that there are two aspects to lifecycle inequalities. We are mainly talking about people who may have left school aged 15 or 16 which, in a sense, means that they will have consumed fewer public resources than many of us who stayed on in the education system for rather longer. At the other end of the lifecycle, however, those people are also consuming fewer state pension resources. There is a double aspect to the inequality.

Teresa Pearce: I agree with my right hon. Friend. It is about proportionality. If someone has worked for 49 years, the proportion of their income that they will have paid into the pensions of other people is quite high. They may then have to wait longer and receive less money over fewer years. The public will see that that is unfair. We are looking for a revolution in pensions. The idea of auto-enrolment is a revolution.
People should understand pensions, what they pay into them and what they get back. There is a misconception that the amount that people pay in national insurance is saved up until they retire. That clearly is not the case. It is the current generations that are paying for the retired generation. That has always been the case. I do not believe that my children and my grandchildren would begrudge paying a pension earlier to those who had worked hard for that length of time and paid their taxes and national insurance.

Chris Evans: May I apologise twice to you, Ms Clark? On Tuesday I was in Serbia and today I am a little late.
I was not going to speak in this debate, but as I listened I started to wonder whether the Government understand equality. They have gone through all the paperwork, but all that I see are the bare facts about women living longer and the state pension age, and all these facts being based on affluent areas, perhaps in England. I think of my constituency in Wales, and even further than that—[Interruption.] I am sorry, I did not catch what the Government Whip said. Does she want to speak? She can speak. Speak. Speak up!

Malcolm Wicks: We want Hansard to capture this moment for posterity.

Chris Evans: I thank my hon. Friend, but I saw a Government Member make an intervention earlier, so I know that they can speak. The cat has not got their tongue yet.
I was speaking about my constituency in Wales. I pay tribute to my hon. Friend the Member for Nottingham South, who spoke about the role of women. It is all very well saying that women will live longer, but the statistics give no idea of their roles. I think of my mother, who is one of those born in 1954. She will kill me for revealing her age; I will not be able to go home tonight or speak to her for a week, because she will probably shout about it.
I shall tell the Committee about my mother’s career. After we were born mother brought us up, so she has a gap in her pension record. She then worked as a sewing machinist and her hands are already starting to go. She now works as a receptionist. Before that, she worked on the railways and was jumping down off the trains, and her knees started to go. I think of her quality of life; perhaps there will come a point—she reaches the age of 60 the year after next—when she will no longer be able to work.
It is very well saying that women tend to work on until the age of 62, but what is the rationale for that? The Government go on an awful lot about fairness. We often accuse them of stealing our clothes, but where is the fairness in saying to people born in 1954 that all of a sudden they have to make some sort of preparation? It comes out of the blue; like many Government policies it is dropped on us. They use statistics and the wonderful phrase “evidence-based”. That is all that we ever hear from them. However, I see people in my constituency, and women who have worked hard all their lives getting— I was about to say something wrong, there Ms Clark; I was going to say that they were getting the “something” end of the stick. I see them getting the pain. To be honest, we need to support the amendment. Those who have worked from the age of 15 need a guarantee that at the end of the 49 years they have something at the end of it.
I seriously believe that the Government are setting a precedent. If we keep increasing the pension age—at the moment, we propose making it 66—because people are living longer and we have had the worst recession in living memory, what will happen in 10 years’ time? What if the Government’s big gamble does not pay off? What if they do not pay off the deficit? Who will get the pain then? Are we going to see the pension age being moved up to 70 in 10 years’ time? Will it go up to 75 in 25 years, with no safeguard? I wonder. That is why I support the amendment.
Thank you, Miss Clark, for indulging me. I shall end there.

Rachel Reeves: It is a pleasure to serve under your chairmanship again, Miss Clark. I thank my right hon. Friend the Member for Croydon North for tabling the amendment and for offering us the opportunity to debate an alternative means of increasing the state pension age. It is clear that there is significant unease about the plans under the Bill that will affect so many women—as we discussed on Tuesday—as well as those men and women who have worked in manual jobs, often since the ages of 15 or 16, which is why the amendment is so important.
I hope the Government will be pleased with the suggestion of my right hon. Friend, who has great experience in such matters. No doubt his amendment will carry substantial weight in their minds. It asks the Government to ensure that the pensionable age is reached no later than 49 years after entry into employment. I believe that my right hon. Friend wants them to consider the amendment in the spirit in which it is intended, which is to ensure fairness within a generation or a year group, as well as between generations.
The story told by my right hon. Friend on Tuesday of his constituent should ring true in all our constituencies, as should the understanding that many people in manual employment face markedly different life expectancy from those in the professional and managerial classes. It is for that reason that the Government should seriously consider the spirit of the amendment, because the issues of social class raised by my right hon. Friend, as well as regional differences, are vital. I want to set out the facts that make the amendment important, and I hope that members of the Committee consider it valuable to consider the pros and cons of the suggestion.
As my right hon. Friend highlighted and knows from his time as Pensions Minister, such an issue is not an easy fix. Turner acknowledged the problem in his report in chapter 8, part 5, when he stated that
“it remains the case that men in socio-economic class V face life expectancy in retirement that is about five years lower than socio-economic class I (for women the difference is about three years), and that as a percentage of expected life in retirement, a one year increase in SPA has a bigger impact on people in the lower socio-economic groups than in the highest.”
The Minister acknowledged that on Second Reading, when he thanked my right hon. Friend for his characteristically thoughtful speech. In his winding-up statement on Second Reading, he also referred to missing national insurance records. It will be good to hear the hon. Gentleman’s further thoughts about the practical steps involved under the amendment.
The spirit of this morning’s discussion has shown a similar interest in the issue to that shown on Second Reading. Such facts will be based on the various differences in life expectancies within and between areas, and within and between socio-economic groups and across genders. As stated in the influential Marmot review, mentioned earlier by my hon. Friend the Member for Erith and Thamesmead,
“Taking action to reduce inequalities in health does not require a separate health agenda, but action across the whole society.”
It continues:
“Action taken by the Department of Health and the NHS alone will not reduce health inequalities.”
When designing policy, the Department for Work and Pensions should not be left out of addressing such an all-encompassing need or recognising that inequalities persist.
We heard a lot on Tuesday about the Government’s long-term fiscal priorities, and we know that life expectancy continues to increase, which is a welcome fact. I hope that members of the Committee recognise that the amendment has the potential to fit into that rubric in some form and to make up the debate. The facts bear out what my right hon. Friend the Member for Croydon North said. It is a vital issue, so let us examine the facts now. The difference in life expectancy between socio-economic groups and geographical areas is linked to the types of work done by people, their lifestyles and their options. For example, there are significant differences between rural and urban areas, as highlighted by the Oxford Institute of Ageing in its ageing study in January this year.

Alok Sharma: The hon. Lady is talking about fairness, as did the right hon. Member for Croydon North. Clearly, the clause and such matters as we have debated today are part of the jigsaw of the pensions landscape. I was interested to know that, when he was Pensions Minister, the right hon. Gentleman also started to consider public sector pension reform. I have a simple question for the hon. Lady, and perhaps we shall also hear from the right hon. Gentleman. Does she agree with the findings and recommendations of the Hutton review?

Rachel Reeves: I do not think that the Hutton review is relevant to this particular amendment, and I am sure that the hon. Gentleman will heed the warning that he received from the Chair on Tuesday, when he was told to stick to the subject of the debate.

Alok Sharma: Will the hon. Lady give way?

Rachel Reeves: I will, if the hon. Gentleman’s intervention relates to this particular amendment.

Alok Sharma: Let me press my point a little further; I seek the indulgence of the Chair. We are talking about fairness and inequalities, which are clearly relevant to pensions. The Hutton review is also relevant, so I ask the hon. Lady once again—she can give a yes or no answer to this—whether she supports its recommendations and findings.

Katy Clark: A number of hon. Members have spoken widely, both today and on Tuesday, about the clauses. I will allow the hon. Lady to respond, but I ask her to do so in the context of this particular clause. The Hutton review says many things, and I do not think that we should indulge ourselves in a full response to all aspects of it. It would, however, be appropriate for the hon. Lady to respond in the context of this particular clause.

Rachel Reeves: Thank you, Miss Clark. One part of the amendment tabled by my right hon. Friend the Member for Croydon North that is relevant to public sector pensions is the issue of 49 years and whether that is relevant to the public and private sectors in relation to public sector and state pensions. It would be interesting to hear the Minister’s views on that. I will stick, however, to the specifics of the amendment, because it is right that we give proper consideration to the issues raised by my right hon. Friend. It is important that every Member of the House engages with the issue, and it is disappointing that the intervention by the hon. Member for Reading West was not on the amendment, but on a wider issue. I hope that Government members of the Committee will recognise, as I believe the Minister does, the importance of the issue and engage with it.

Malcolm Wicks: My hon. Friend has been generous in giving way to me and to the hon. Member for Reading West. Will she promise to continue to be generous in giving way if any Government members of the Committee want to engage in this debate? It affects so many of their constituents and is about justice and fairness. It is important that this does not look like some sort of pre-revolutionary Tunisian Government or Parliament, and that there is a proper debate. Will she give way to them if they raise relevant issues?

Rachel Reeves: I will go further than that; I will give way and welcome any interventions. More than that, I would welcome a speech by one of the Government members of the Committee on the amendment or on other issues. The Minister said on Second Reading—I will say this again—that he welcomed the characteristically thoughtful speech made by my right hon. Friend, who has rightly said that the issues raised, not just by the amendment but by the spirit of the amendment, are important. It asks us to look at the differences between the options and expectations of people in different groups and the impact they will have on their working life and their life in retirement. Many of us hear about those issues in our constituency surgeries and when we are out and about in our constituencies. I would, therefore, welcome interventions and speeches. If any Government member looks up to catch my attention, I will certainly give way to them. A few of them look up, but they do not try to intervene, which is a shame.

Chris Evans: Look up!

Rachel Reeves: I thought I heard a peep, but I did not. A key factor that the amendment seeks to address is the differences in when people start working. Many people still leave school at the ages of 16 and 18 to start work, but we all know—Opposition members of the Committee have given examples from their own families and constituencies—about the different ages at which people start work, particularly in the generation under discussion. When I was at school, some of us left at 16 while others went on to study until our early or mid-20s. Time spent in work differs across socio-economic groups. It has also changed over time, as Members have attested to this morning.
By the time that many people, especially those in manual work, come to retirement age, they are often worn out. Today, a 65-year-old man may have worked for 50 years, as is clear from the stories recorded in Committee and on Second Reading. For a 65-year-old who has worked in a physically demanding job for five years less, the difference is stark. Perhaps that is also one of the reasons that explains the differential life expectancies and healthy life expectancies at age 65. As we ask people to work longer, it is important to look at the alternatives to periodic increases for everyone in the state pension age, and to understand what we are demanding of those who are affected by politicians’ choices—that is, to look at the impact on our constituents.
Before looking at life expectancy by social group, I want to touch on another issue highlighted by hon. Members—healthy life expectancy, which is not rising as quickly as life expectancy, as the Government assessment of the Bill indicates. In 2006, men and women of 65, on average, could expect to enjoy about three extra years of healthy life compared with 1981. Life expectancy has increased by around 4.6 years during the same time, so we can see a difference between healthy life expectancy and life expectancy of about 1.5 years over that period. When we look at the state pension age, particularly how people in different socio-economic groups are affected, it is important to look not only at how long people live but at what sort of life they live in retirement. My hon. Friend the Member for Erith and Thamesmead made that point extremely well when speaking about her own family.
According to the Office for National Statistics spring 2010 Health Statistics Quarterly, at age 65 a gap of 6.54 years in healthy life expectancy was present between professionals and the unskilled class. Professional men had significantly higher healthy life expectancy and unskilled men significantly lower health expectancy compared with the intervening social classes, both at birth and at age 65. As we increase the state pension age, we should look into how we are potentially differentially impacting different social groups.
As I have alluded to already, what makes the amendment so important is the stark differences in life expectancies at state pension age, which can be seen in income and class terms and in geographical terms. The differences bear setting out in detail. First, looking at life expectancy by socio-economic group, if we take men in social class I—higher managers and professionals—7% died before the age of 65, whereas, of men in routine occupations, 19% or almost one fifth did so; that is a ratio of 2.6:1 between the two class groups. Men are more than two and a half times more likely to die before their 65th birthday if they do a routine job, compared with a higher managerial or professional worker. Of all the statistics we have heard, to me that is probably the most shocking. As my right hon. Friend the Member for Croydon North highlighted on Tuesday, that is a significant difference.
Going through the class groups, of high managerial and professional men, 7% die before their 65th birthday; for women in that class, the figure is 4%. In the lower managerial and professional class, 10% of men die before their 65th birthday, and 5% of women; in the third or intermediate social group, 11% of men and 5% of women; in the fourth group, of small employers and own account workers, 12% of men and 6% of women; of lower supervisory and technical workers, 14% of men and 7% of women; of those in semi-routine jobs, 17% of men and 7% of women; and, of those in the routine jobs who I mentioned earlier, 19% of men and 10% of women. The data come from the ONS.
The shorter life expectancy is not only a devastating reality but also means that the pension years, in which different social classes can expect to draw their pension, are vastly different as well. A longitudinal study from the ONS shows that, at age 65, men in the professional class are expected to live an extra 18.3 years, and the women 22 years; in the managerial and technical class, men 18 years and women 21 years; for skilled and non-manual workers, men 17.4 years and women 19.9 years; for skilled and manual men, 16.3 years, and the women 18.7 years; for partly skilled men, 15.7 years, and the women 18.9 years; and for unskilled men, 14.1 years, and the women 17.7 years. We can see from those statistics the big differences in life expectancy at age 65.
What does that mean for the pensions of the different groups? The difference in life expectancy between men in unskilled work and men in professional jobs at the age of 65 is 4.3 years. Claiming a state pension for 4.3 years amounts to a difference of £21,500. These men not only die earlier, but get less out during their lifetime in retirement. Therefore, they spend more time in the labour market and draw their pension for fewer years in retirement. Moreover, the professional retiree is much less likely to rely on the state pension in their retirement. Such facts are worth taking into account when we look at the state pension age to see whether it is fair to people from different socio-economic groups.
Although there has been an increase in longevity at the age of 65 across all socio-economic groups, there remain big differences between manual and non-manual workers and also big differences in healthy life expectancy. Some 87% of men in manual jobs at the age of 50 can expect to live until they are 66, while the figure for men in non-manual jobs is 91%.
There is great diversity between areas, which was highlighted by my hon. Friends the Members for Erith and Thamesmead, for Nottingham South and for Edinburgh East. The statistic highlighted most regularly and used by my right hon. Friend the Member for Croydon North is that while life expectancy at 65 in Glasgow is 78.8, it is 87.7 in Kensington and Chelsea. That is a difference between two cities in different parts of the country. Why do statistics show a similar story? Life expectancy in the UK at age 65 for men is 17.8 years, while for women it is 20.4 years.
Let us now break those figures down into the different nations in the UK. In England, life expectancy at 65 for men is 18 years, while it is 20.6 years for women. In Wales at age 65, men are expected to live for an additional 17.4 years and women an additional 20.1 years. I am sorry to tell my hon. Friend the Member for Edinburgh East that in Scotland, men are expected to live for 16.6 years and women for 19.1 years. We do not have any hon. Members from Northern Ireland here, but men in Northern Ireland at age 65 are expected to live for an additional 17.2 years while women are expected to live for 20 years.
If we look at the south-east, the area with the highest life expectancy at age 65, men are expected to live for an additional 18.7 years while women are expected to live for an additional 21.3 years. In the north-east and the north-west, the area in England with the lowest life expectancy, men are expected to live for an additional 17 years and women for an additional 19.5 years.
We are well aware of the differences between regions, but there are also stark differences in the prospects of people who live just streets away from each other, as my hon. Friend the Member for Edinburgh East highlighted. In Leeds, where I am a Member of Parliament, life expectancy is 12.2 years lower for men and 8.3 years lower for women at age 65 in the most deprived areas compared with the least deprived areas. When those areas sit just a few miles apart, for example New Wortley in my constituency or Harewood, it is clear that we have a significant issue. The reasons for that are manifold. One relates to the types of work that people do. Many people who worked at the Roberts factory in my constituency over the past 30 years have contracted asbestosis and mesothelioma and died early deaths, and that was as a direct result of the work that they did. My hon. Friend the Member for Erith and Thamesmead touched on that point earlier today.

Andrew Bingham: The hon. Lady is dazzling us with a blizzard of figures and statistics, so it is hard to keep up with her. If she has addressed this point, I will happily hear it from her again. She talks about the different life expectancies relating to different workplaces, but does she not concede that such figures are equalised as time goes on as different forms of health and safety measures are brought in, such as regulations? The gaps are decreasing because of better working practices.

Rachel Reeves: I thank the hon. Gentleman for his intervention. It is nice to know that someone on the Government Benches is listening to me.

The Chairman adjourned the Committee without Question put (Standing Order No. 88).

Adjourned till this day at One o’clock.